Appraisal Nightmare

March 14, 2011 at 7:07 pm | Posted in Uncategorized | Leave a comment
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So I got an appraisal request a few months back. I don’t recall the exact date, but let’s just say that it got lost in the shuffle. I’m writing about it because the client called to check on the status about 10 days later, at which point my reaction was “ummmmm”. This is totally out of character for me as despite my “organized chaos” system, I never misplace a file in process.

Here’s a little background on this particular order. It was for an older home on the west side of town- so like 55 miles away. That’s way out of my preferred coverage area, but back in 2006 I appraised that same house for the same borrower and out of state small bank. Back then it was worth a decent amount. Large lot, nice home, horse property, well kept. Turned out that the borrower was going to cash out some of his equity to start a business- back then.

When I got the call to reappraise the home now, I instinctively accepted the work- not because I mind the drive, but because I had established a rapport with the contact at the bank- despite the fact that I never received any other business from them. Also, my business has changed since 2006. Back then I was doing triple the volume of work for a fee split. So when I’d drive across town to do an appraisal, I’d have at least 1 or maybe up to 3 others that I could knock out the same day. Today I only do full fee work and since there is no split, I actually turn down most work that is outside of a “convenient” coverage area. However, with this case, I accepted the assignment…

So when I got the call from the client, I went to look up the prior order so that I could print out the prior sketch. This is great for “redos” as you really don’t have to remeasure the property or re-enter a lot of the basic information like the neighborhood description, legal information, address, construction materials, etc.. I just bring a copy of that sketch and make notes about any changes since the last time. First problem was that sometime over the prior 4 years, I changed computers and I had to retrieve the old file. I had the work file of the property of course, but I really needed that electronic copy of the appraisal. I then pulled comparables based on the basic property characteristics and considering where the market is today, that was like pulling teeth as volume of sales has gone way down. So i got some good sales and made the trek out to the home…

When I got there I was in shock at what I saw. The house had been modified, and when I say modified, I mean the floorplan had changed. So I had to remeasure the home from scratch. No problem- I’ve got my trusty Disto laser tape measure. But of course, instead of being 1,600 square feet, now the house was 2,700 square feet. So now the comparables I brought with me are bad. I always pull comparables based on the property characteristics before I visit the home- BASED ON WHAT I THOUGHT WAS THE HOME! As a small shop, I make hay while the sun’s shining and in this case, I had no trusty internet access and no way to pull different comps. I have subsequently purchased a Droid, so that won’t happen again. I called an AMC that I’ve worked with for years so that maybe they could help- no joy as they were all out of the office. Meanwhile I’m thinking “I do not want to drive back out here! I do not want to drive back out here!”

Finally, I called up my old mentor in California- heck he’s an appraiser so he walks the walk. I have to give him the MLS website URL from memory, give him an over the phone lesson on how our MLS works and then give him what I think are good search criteria. It took half an hour but by gosh, we did it. He was able to provide me with 4 closed sales and a few pendings and actives that would help me out. I drove those homes, snapped my photos and headed on back- to the East side.

Now some apprasiers would simply leave and then pull data on their own later. Then they’d copy photos from the MLS and use those for their reports. And some better apprasiers would do that and then go back out and take photos of the comps. But I’m too lazy to make that second trip. And I’m an appraiser who recognizes that you need to physically see each sale in order to compare it to the subject. I’m not trying to brag too much here- just show how a little knowhow can make up for not being as prepared as you think you are.

Visit our website at http://www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try http://www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude AND we just added a Facebook page at http://www.facebook.com/appraiserdude. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

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How to Prevent a Realtor-Appraiser Breakdown

July 31, 2010 at 3:36 pm | Posted in Uncategorized | Leave a comment
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It never ceases to amaze me that the various parties involved in a real estate transaction can have such little knowledge of what each other does and have the audacity to pull attitude with each other.  I can tell you stories of Realtors who refused to unlock a home for me because it was half an hour from their office. Or how about the loan officer who told me to trim my report size- not the file size but the number of pages- and when asked which part, they said “I don’t know, it’s just too much to read- remove like 8 pages”.  But today I’m not going to share war stories, but instead offer some constructive advice to my Realtor “friends”

The Home Valuation Code of Conduct (HVCC) was created to help eliminate pressure between appraisers and anyone who might try to influence them.  Yay!  But that’s like saying condoms protect you from pregnancy or venereal disease.  I can’t tell you how many times that in the heat of passion I’ve incorrectly tried to put on a… oh wait, where was I?  Ah yes, the HVCC creates more of a letter of the law vs. spirit of the law dilemma which has caused overreaction.  Should Realtors interact with appraisers?  If an appraisal’s value is below the contract price, should the Realtor try to fight it?  And if so, what is the right way to do it?  That’s what I’d like to help you with today.

When I want to inspect a home for purchase, I always call the listing agent- not to meet with them, but to ensure them that I am on task and to confirm accessibility to the home.  Plus, if it’s an FHA loan, I need to make sure that utilities are on.  And get ready for my taxicab confession- I do not own an electronic SUPRA key! 

Now you can criticize me for that little ditty, but when the industry slowed down a few years back, I simply couldn’t justify keeping it- 90% of the homes I appraised were either on combo box, were retrospective drive by assignments or by golly, the Realtor would be more than happy to meet me at the property to let me in.  My attitude was that Realtors involved in a transaction would be more than happy to help in the process.  And guess what- in two years I had a total of two Realtors actually give me attitude about me not having a SUPRA key.  I could have lied and said mine was broken, but I just say that I don’t have one.  In fact recently, I had an assignment where the Realtor just flat out said that she couldn’t drive the 15 minutes to the home- (I hadn’t even suggested an appointment time)- and she didn’t offer an alternate solution.  I could feel her “holier than thou” attitude through the phone, so when she asked why I didn’t have a SUPRA key, I was in a rare mood where I said “I’ve found that the better Realtors who care about their transaction will meet me at the property”.  Too bad that she wasn’t so dense to not get what I was saying, and when she said that the assignment would have to be reassigned, I was busy enough where I simply said “ok, have a nice day”.

But let’s move on to something else.  Should Realtors provide comparable sales for the appraiser?  Absolutely!  Print out a list, put your own notes on each one- not opinions but facts based on YOUR honest observations like “mold problem”, “similar upgrades”, etc.  But please, don’t lie.  Appraisers aren’t dumb.  But here is why you should do this.  Appraisers cover a region- for instance, I cover the Phoenix metropolitan area even though I’m based out of the Southeast Valley.  That’s a pretty big area to be an expert on.  I can honestly say that I have done a majority of neighborhoods in the region, but I don’t do them regularly.  The Realtor is supposed to be the local expert.  Also, as the local expert what about sales that were incorrectly input in MLS or were For Sale by Owner?  I’ve seen plenty of sales that don’t show up in a regular search because perhaps the Realtor misspelled the city name or the mapping software doesn’t plot it properly.  If the Realtor knows about relevant sales like this, they should be provided to the appraiser.  And put a note on the list that says “Hi George, I’m sure you already have data on all these comps, but I figured I could save you some paper and extra phone calls to Realtors”.  Worst case scenario- he throws them away.

WHAT ARE GOOD COMPS?

Now the key to understanding what “good” comps are is rooted in understanding the appraisal guidelines as set forth by Fannie Mae, HUD or specific lending institutions.  How old can comps be?  How far away can they be?  How much different can they be?  There are no definitive answers to any of these questions.  Sure you might have heard “one mile” or “six months”, but it all depends on the data available.  If the subject is a tract home built in 2000 and the Realtor thinks value should be based on 7 month old sales that are in a different neighborhood- but there are ten sales from a month ago in the subdivision, then that Realtor is in for a rude awakening.

But what about when the appraisal is already completed and the value is “killed”.  Well first of all, a Realtor needs to take on the attitude that the appraisal is now evidence that the home might be overpriced.  Perhaps the best course of action would be to try to negotiate a lower contract price- after all, you can now confidently say “an appraiser expert has proven that the home is overpriced, so you’ll never sell it for that much.” 

However, if the deal is potentially lost, then of course the Realtor might be upset but how should it be handled?  First and foremost, one must know what they are talking about so if you can see a copy of the appraisal, then look at the sales used and the property details.  Did the appraiser forget anything that significantly adds to value?  Maybe they forgot to mention the in-ground swimming pool, or maybe they didn’t notice the upgraded padding.  Now of course the pool is a glaring thing but let’s talk real quick about “upgrades”.  We’ve all seen the articles that tell you what home improvements add the most value to a home and guess what- most of them, don’t add dollar for dollar value.  So sunscreens, extended garages, updated carpet padding, 2 inch blinds, etc. don’t really matter in the grand scheme of things.  When Realtors tell their clients to make business decisions instead of emotional decisions, oftentimes they are just as guilty of thinking too much of their own listing.

Next, look at the comparable sales used.  Are they really similar properties?  Are they recent sales?  If you have three “better” sales but they’re older sales, or further away, or newer homes, then you’re fighting a losing battle.  Now put yourself in the shoes of an underwriter who sits in a cube in some high rise in Chicago.  When that decision maker looks at the data (whether it’s the appraiser’s or the Realtor’s), what will make more sense to them?  Remember, this isn’t 2005 anymore.  Some lenders are actually looking to make good business decisions instead of simply rubber stamping loans.

So if you really feel that the appraiser did something wrong, or ignored more appropriate comparables, how do you proceed?  I’ll tell you right now, that we appraisers are a proud race and we don’t like to be told that we are wrong, so you need to present this information in a loving, caring manner – I’m totally serious.  Write a letter- thank the appraiser for all his hard work, and mention that it was a pleasure meeting him.  Pat his back for his integrity and quality and admit that what you’re asking is not normal.  And then present your comparable sales.  Ask him if he wouldn’t mind helping you be a better Realtor so that you can do better on your next transaction.  Literally ask him to explain why he didn’t consider your “better” sales.  Maybe you’ll paint him into corner and he’ll understand that he screwed up- and that you know it.  But don’t get all accusatory.  Make it clear that you are not trying to influence value but that you want to make sure he has the necessary data.  You might even want to ask him what he’d recommend you do at this point- “should I request a second appraisal?”.  Thank him for his consideration and respect his response, and CC the loan officer as well…  What you’re doing is planting seeds of doubt in the appraiser’s head. 

Now remember, I’M an appraiser!!!  So why am I trying to teach you how to get your way with an appraiser?  Well that’s a perception issue.  I’m not trying to teach you to influence, I’m trying to explain how you can tactfully and ethically present your case and perhaps get an appraiser to reconsider his value.  There’s nothing wrong with that as long as your argument is based on fact.  But guess what?  He probably won’t do anything… but he might if you present a strong case.  If he ignores your letter, then you really have no recourse.  If you really do know that the appraiser was completely negligent or that he lied about something, then of course you can file a complaint with the state appraiser board.  But unless the complaint is about fraud, it’ll get dismissed.  Remember, above all else an appraisal is an opinion of value and it should be rooted in factual data, and if the appraiser presented his data clearly and accurately, you can’t dispute an opinion- you can only dispute facts.

Visit our website at www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude.  Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

What’s the Typical Appraisal Workload Nowadays?

October 1, 2009 at 5:27 pm | Posted in Uncategorized | Leave a comment
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As times change, lines of appraisal work shift.  Back in 2003-2004, my work was about 47% rate and term refinances, 47% purchases, 6% “other” which included review work, estate settlement, bankruptcy, divorce, and hard money (like the guy who needed to refinance so that he could raise enough money to post bail for his son)

When I moved to Phoenix in 2005, the chunk of purchases jumped up to about 60% and then starting around 3rd quarter of 2007, that ratio shifted to a lot fewer purchases and actually volume so low that I can now admit was too small to gague statistics.

But today, I can actually measure my work volume and it has shifted significantly.  I went back 90 days to itemize the work I’ve done and here’s the approximate rundown:

 

My Trailing 90 Days Volume Breakdown

What, were you expecting actual numbers? 

Anyway, keep in mind that of the refinances, a lot (I assume) ended up below what they “needed” to make their deal work, but at least now I don’t feel the lender pressure to hit some sort of value with the unspoken threat of losing future work.  How do I know this?  Let’s just say that if they bought the home in 2006 for $350k with a $320k first mortgage and now the home is worth $160k, I surmise that they didn’t pay down their mortgage by over $160k over those 3 years.

As you can see, I now do a lot of Review appraisals.  Back in the day, these would be reviews of recently completed appraisals.  I rarely get those now.  What these reviews are is typically foreclosed homes that were appraised in the 2005-2007 era back when values were very high.  Someone wants to know if that appraisal was inflated.  And for the sake of privacy, I’ll just leave it at that.  And of those that I review, I’d say 95% of them WERE inflated.  At first I was a little confused on the purpose of these assignments because I would assume that some of these Appraisers are now out of business with little or no possible recourse.  But in actuality, these are not for the purpose of hunting down bad Appraisers, but instead to determine the big picture of the original transaction.  These assignments are pretty low stress in that I never enter the home being appraised, but it’s pretty glum work as that’s a lot of assignments where I never step out of the car.  And as an aside, I often see the original appraisal from say 2006, which shows a beautiful home, and when I see it (from the street and perhaps a newer listing now that it’s foreclosed), it’s a completely thrashed home- complete with holes everywhere, nasty carpets, overgrown yards and green pools.

REO work is Real Estate Owned assignments.  These are an example of how appraisal volume has increased over recent years.  These assignments are essentially pre-listing reports requested by the bank that now owns a foreclosed home.  Take for example the bank based in South Dakota that now owns a foreclosed home in Arizona.  They don’t know the market out here.  They KNOW that these free online home valuation sites are a complete waste and completely unreliable.  So among other things, they order what is known as an REO appraisal.  Basically, they want to know the appraised value based on closed sales, but they are very interested in what it would take to make the property truly competitive with other homes for sale, so a very detailed list of things wrong with the home is required.  Also, the other available listings are paid very close attention to.  Basically, the bank wants to get rid of these non-performing assets so they want to know what it will take to get these homes sold in a relatively fast time.

Estate work is on the rise.   People are always dying and the estate needs assets valued.  But when you add in a bad economy, you unfortunately get a lot of personal issues that require appraisals.  Bankruptcy and divorce are prime reasons why homes are appraised, so that the parties know how to proceed.  It’s sad but reality.

So, let me paint an image of the volume of appraisal work that I’m seeing or that can affect a single property over a relatively short period.

  1. Family buys a home in early 2006- conventional appraisal
  2. Family refinances their home in late 2006 to take out money for improvements- FHA appraisal
  3. Family decides to sell home in 2008- listing appraisal (not required but often done)
  4. Family can’t sell home by late 2008 and lowers price to point to breakeven point, spouse loses job, couple decides to divorce- estate appraisal
  5. Owner negotiates with bank for a short sale- bank gets an offer below asking price in early 2009 and questions if it’s a good offer- REO appraisal
  6. Short offer falls through, home is foreclosed in March 2009, bank wants to relist it- REO appraisal
  7. Third party questions original refinance appraisal August 2009- Retrospective review appraisal
  8. New buyer comes in and buys home September 2009- FHA appraisal

That’s right, we’re talking 8 separate appraisals on the same home within a very short period, all for different reasons or for different parties.  That’s a lot of potential work for Appraisers nowadays.

Now don’t get me wrong, I don’t want anyone to get the idea that I’ve got more work than I can handle- after all, I just spent the past few hours writing this blog!  More on the socialization of the appraisal industry some other time.  Don’t even get me started on the 20 year veteran getting the same pay/volume as the newbie.  (I’m somewhere in between- just a squirrel trying to get a nut)

Visit our website at www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude.  Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

What’s a Zero Lot Line Home?

September 30, 2009 at 5:17 pm | Posted in Uncategorized | Leave a comment
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Well, since I’m doing one now and haven’t posted in a while, here’s a quickie. 

Sometimes you hear of a home being referred to as a “zero lot line” home.  While this might be somewhat self explanatory, I tried looking for a photo example online and came up dry. 

zero lot line homes

zero lot line homes

Notice on the right side of the main home in the photo, the wall lines up with the leftmost wall of the adjacent home.  These are zero lot line homes.  As you can guess, the lot size is smaller (3500SF in this case).  This is great for builders as they can cram more homes into an area and it’s a good option for homeowners.  Typically when you are moving up the housing chain you might rent an apartment, buy a condo and then buy a single family home.  But perhaps you’re not ready for a full on home with a big lot and the costs associated with maintenance.  Zero lot line homes are typically a tad less expensive and have less lawn/lot to maintain.  A win win for the “tweener” who is looking to buy their first single family home.

Visit our website at www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try www.appraiserdude.com. Or now you can follow us on Twitter at @appraiserdude.  Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

Introduction

October 20, 2008 at 3:39 pm | Posted in Uncategorized | Leave a comment
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Hello,

My name is George Easton and I own a residential real estate appraisal company named Advantage Appraisals, LLC in the Phoenix metro area.

We cover all of Maricopa county as well as most of Pinal county for:

  • Reverse Mortgages
  • REO Assessments
  • FHA Loans
  • Divorce Settlement
  • Bankruptcy Valuation
  • Estate Planning
  • Proposed Construction
  • Million Dollar + Homes
  • Appraisal Review
  • Vacant Residential Land
  • Pre-Listing Analysis
  • Renovation-Return Consultation
  • and of course primary and secondary mortages

We were ranked in the Phoenix Business Journal Book of Lists- 2006, but not in 2007 since they decided that the new measure of success is the number of reported employees vs. quality or quantity of work. So I hate to admit it, but we’re what’s called a small shop.

We pride ourselves on excellent customer service, high quality work and fast turnaround. If you’re looking for a cheap appraiser, then you’ll probably have to look elsewhere. I’m not saying that we are expensive, but we don’t believe in undercutting our fees just to get business. You really do get what you pay for.

Visit our website at www.advantageappraisalsllc.com, and if that doesn’t roll off the tongue, just try www.appraiserdude.com. Give me a call at 480-544-1217 if you have any questions. I look forward to working with you.

Sincerely,

George

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